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Ag Marketing
Unit 1 Review
| Term/Question | Definition/Answer |
|---|---|
| Advertising Dollars | spent in large amounts to entice you to buy one finished product over another |
| Promotion Dollars | spent to get you to recognize the better quality and/or value from this differentiated product |
| What must farmers and ranchers do in ag marketing? | Farmers and ranchers must take the price offered |
| What is one advantage grain producers have over livestock producers? | Grain producers can store their grain for longer periods of time before selling the grain. Livestock producers have a smaller window to sell due to prices and space to keep the animals. |
| How many different types of utility do ag products have and what are they? | 3: Form, Time, and Place utility |
| Form utility | results from the actual production of raw grain and livestock |
| Grain Form Utility | actual size, weight, moisture content |
| Livestock Form Utility | actual size, weight, cutout percentage/yield, fat content, and other quality factors |
| Time Utility | represented by the amount of time it takes to produce the grain and/or livestock product and when that time frame occurs |
| Grain Time Utility | Spring/Winter Wheat Harvest: typically completed between May/August for most of U.S. wheat belt; October/December: when corn is typically harvest for most of the U.S. corn belt; |
| Livestock Time Utility | Chicken: two months to grow a baby; Cattle: 600-800# feeders calves between October/December |
| Place Utility | where the commodity is produced in the U.S. and what the established marketing channels for moving that raw product into further processing channels |
| Grain Place Utility | how close wheat production to transport to export markets/milling facilities; how close is corn production to ethanol facilities |
| Livestock Place Utility | how close beef production to kill plants/packing plants |
| Economic Profit | TR (P x Q) - TC (TVC + TFC) = Profit; Total Revenue (Price x Quantity) - Total Cost (Total Variable Cost + Total Fixed Cost) = Profit |
| Variable Cost | moves with produciton |
| Fixed Cost | Stays the same despite production |
| Hedgers (F/R) | seek to reduce the risk of future price fluctuation by hedging risk and transferring the risk to market speculators; |
| Hedging | transfers price risk to traders (speculators) |
| Speculators (Traders) | Hope to make money on price movements, up/down; Planning Horizon, short term, frequently that days' price action; Typically, doesn't hold any commodities/need to purchase any - paper transactions; Risk Takers - take on risks hedgers eliminate |
| Hedgers (Farmers/Ranchers) | Needs to sell commodity output in future or buy commodity input in future; Goal of achieving commodity price allowing a profit in business operation; Planning Horizon is long term profitability/growth of business; Integrates necessary part business |
| What two emotions control the market? | Fear and Greed |
| What is an essential first step in ag marketing? | Completing a financial analysis of the operation |
| What are the key elements in a financial analysis? | Enterprise Budgeting; Balance Analysis; Income Statement Analysis; Cash Flow Analysis |
| Enterprise Budgeting | Determines breakeven commodity pricing; Completed early/before growing season for commodity being produced; Project price to be received/develop budget listing gall anticipated costs to determine reasonable profit above breakeven; |
| Balance Sheet Analysis | A measure of financial condition at point in time; Ledger listing all business assets on left side, all business debt/resulting amount equity on right side, |
| Income Statement Analysis | Measure of financial performance over period of time; Marketing/Calendar year; Statement lists all income generated during year/subtracting all expenses incurred in generated income during year from said income; Income greater than expenses - Profit |
| Cash Flow | A measure of actual cash generated/spent during course of the year; Creditors particularly interested bc want to know if can make loan payments and how much cushion to cover unexpected shortfalls/increased expenses |
| Oats Food | Cereals, Oatmeals |
| Oats Feed | Horses and other livestock |
| Barley Food | Beer, Spirits |
| Barley Feed | Livestock |
| Sorghum Exported | Asia: China |
| Sorghum Feed | Corn Substitute |
| The class will focus on what three main grains? | Corn, Soybeans, and Wheat |
| Fundamentals of Supply and Demand in the Market | technical adjustments/speculaiton about other factors affecting the market: long term/short term |
| Long Term | Fundamentals of this year's marketing year uses compared to past years; Supply/Demand |
| Short Term | Weather; Politics; Unforeseen changes in exports; etc. |
| NE = | big Co-op state; lots of co-op elevators |
| On Farm Storage | Farmers produce crops and control when they are sold into cash market; financially tough times, lends have huge say in marketing plans |
| Local Elevators | Provide grading, condition, and further storage as seek to market grain bought from farmers for a profit; Price offered to farmers must leave room for mark up in price to make a profit; |
| Where does the grain the local elevators market go? | Area processors - Cattle feeders, Soybean Crushers, Ethanol Plants; Larger terminal elevators; Export terminal elevators |
| Large Terminal Elevators | Wheat millers; Soybean Crushers; Ethanol Plants; Export Terminals - inland/shoreline (close to water transport) MN, MS, OR |
| Export Terminal Elevators | Cargill - Raw Grain; Continental - Raw Grain; Bunge - Raw Grain; Louis Dreyfuss - Raw Grain; OR, MN, New Orleans |
| Pricing Tools | Forward Contracts; Futures Contracts; Futures/Options Contracts; |
| Pre-Harvest | Prices high, cash market grain right out of field |
| Post-Harvest | Store grain after harvest; Run a year or longer if have adequate storage |
Created by:
horktera
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